February 28, 2022

PenCom, NLC, PENOP reject bill to remove NPF from CPS

Nigeria’s pension assets grow by over 3%

By Victor Ahiuma-Young

THE National Pension Commission, PenCom, Nigeria Labour Congress, NLC, and Pension Fund Operators Association of Nigeria, PENOP, have rejected a bill to remove the Nigeria Police Force, NPF, from the Contributory Pension Scheme, CPS.

The trio spoke in Abuja during a public hearing on two pension-related Bills by the House Committee on Pension.

They are a Bill for an Act to exempt the Nigeria Police Force from the CPS and a Bill for an Act to further Amend the Pension Reform Act 2014 to, among other things, provide for a retiree to withdraw a lump sum of at least 75 per cent from the Retirement Savings Account, RSA, and to criminalise undue delay in the payment of pension and for related matters

Speaking, the Director-General, DG, of PenCom, Aisha Dahir-Umar, said the CPS has provisions that can address the challenges being faced by personnel of the Nigeria Police Force, NPF, and other Federal Government agencies on the administration of their retirement benefits.

“The solution to the pension challenges of the personnel of the Nigeria Police does not reside in their exemption from Contributory Pension Scheme and reversion to the Defined Benefits Scheme, which is clearly unsustainable,” Dahir-Umar told the Committee.

She said the absence of other social security benefits in Nigeria is partly responsible for the clamour by the retirees for an exemption or to access substantial amounts as a lump sum from their RSA balance.

The DG said: “Exemption of the personnel of the NPF would imply additional financial burden on the Federal Government by way of unsustainable pension obligations. For instance, as of September 2021, there were 304,963 Police personnel based on IPPIS data. An actuarial valuation revealed that the retirement benefits (pension and gratuity) liability of these personnel under the defunct Defined Benefits Scheme would amount to about N1.84 trillion.”

On the other hand, she said that the liability under the CPS for the same NPF personnel is made up of N213.4 billion as accrued pension rights and monthly employer pension contributions of about N2.2 billion.

The DG said to address the concerns of Police personnel on pension, the employer can review upwards its current contribution rate of 10 per cent.

In addition, she said the PRA 2014 further provides that notwithstanding the pension contributions made by employer and employee into the employee’s RSA, the employer may agree on the payment of additional benefits to the employee upon retirement.

“Accordingly, the Federal Government may wish to provide additional benefits in the form of gratuity to personnel of the NPF upon their retirement.”


Similarly, the Chief Executive Officer of the Pension Fund Operators Association of Nigeria, PENOP, Oguche Agudah, said the exemption of the Nigeria Police Force from the CPS would take Nigeria back to the dark ages before the pension reforms.

“This was a time when retirees had to depend on a defined benefit system; where the Federal Government paid monthly pensions to retirees directly from its coffers,” he said.

Agudah said at the time of the reform, it was estimated that the Federal Government had a pension liability of over N2 trillion.

“Past experiences have proven that this system puts a lot of burden on the Federal Government, making it unsustainable. The sustainability of moving the Police back to the pay–as–you–go Defined Benefit Scheme under their proposal is near impossible, given the Federal Government’s struggling finances at the moment,” he said.


Also speaking, Nigeria Labour Congress, NLC, represented by its Head of International Relations, Uche Ekwe, said: “Where will the money to fund the Defined Benefits Scheme for the exempted officers come from? Will it still be funded from the national budget that currently is hardly sufficient to fund other commitments of the government, including healthcare and social security?

“What has changed in the management of Defined Benefits Scheme, especially in the light of news of arrests and convictions of individuals involved in the mismanagement of pensions? This is because exemption of the personnel of the NPF would imply an additional financial burden on the Federal Government by way of unsustainable pension obligations. Statistics from the pension industry indicates that the Federal Government would need over N1 trillion to finance the exemption of the police personnel from the CPS.

‘’This liability is expected to significantly increase with the proposed yearly recruitment of 10,000 personnel into the Police force as announced by the Federal Government. The Federal Government is already overburdened with the payment of pensions under the Defined Benefits Scheme, DBS, as illustrated by the 2022 Appropriation Act, which made a provision under the Service Wide Vote for the sum of N577.3 billion as total allocation for Pension and Gratuities.

“The NLC, therefore, recommends without trepidation, that the issues of the inadequacy of retirement benefits in the RSA, which is always posited by the proponents of the exemption of the Nigeria Police, could be sufficiently addressed within the framework of the CPS. The NLC accordingly calls on the government to enhance the salary of the Nigeria Police personnel and restore the payment of gratuity to workers upon their retirement. Incidentally, gratuity has not been abolished by the PRA 2014.